NEC to cut 10,000 workers, forecasts US$1.3 billion loss in year through March

Jay Alabaster |
Jan. 27, 2012

NEC said Thursday it will cut 10,000 jobs, including 3,000 outside of Japan, and it now forecasts a US$1.3 billion loss in the current fiscal year through March.

NEC said Thursday it will cut 10,000 jobs, including 3,000 outside of Japan, and it now forecasts a US$1.3 billion loss in the current fiscal year through March.

Just three months ago, the company had forecast a net profit of ¥15 billion (US$200 million) for the fiscal year.

It is still suffering from the effects of massive floods in Thailand, which closed two of its factories in the country and crippled its supply of hard disk drives.

NEC's mobile phone business is also reeling, as foreign brands continue to make inroads into the Japanese market, long a safe haven for domestic manufacturers. Like many of its domestic peers, the company has been slow to shift to smartphones and has suffered losses as international rivals like Apple and Samsung capture market share with flashy, high-spec handsets.

Specifics of the job cuts are still being finalized, though they will likely take place in the next fiscal year, which begins in April. The company had 112,000 full-time workers at the end of 2011, and plans to cut 5,000 full-time employees and 5,000 contractors.

Faced with intense competition in consumer electronics, NEC is trying to shift its focus to large-scale industries like cellular infrastructure and big IT contracts. Last year it agreed to launch a PC joint venture with Lenovo in Japan, a deal that includes the spin-off of its personal computer division.

NEC said the bulk of its projected losses for the fiscal year came in the October to December quarter, when it booked a ¥86.5 billion loss on revenues of ¥669 billion, down 7 percent from a year earlier. It said the massive annual loss will include large one-time charges resulting from restructuring, which includes the layoffs, and tax considerations.

The company said the situation in Thailand is getting better, with the scarcity of hard disks clearing since the end of last year. It also aims to reopen one of its Thai factories for March.

The fiscal year for many Japanese companies including NEC runs from April through March.